As geopolitical tensions in the Middle East send ripple effects across global supply chains, three of Australia’s four largest financial institutions have issued a coordinated warning of mounting economic pressure on domestic households, with multiple interest rate increases, soaring living costs and stalled growth projected in the coming years.
Westpac, the latest major bank to release its gloomy economic outlook alongside half-year financial results, forecasts that the Reserve Bank of Australia will implement three additional interest rate hikes for mortgage holders, with the first increase expected as early as this Tuesday. The bank projects inflation will climb to 4.6% and GDP growth will cool to just 1% by the end of December 2026, a sharp slowdown from current trend levels.
Westpac Chief Executive Anthony Miller directly tied the worsening economic outlook to ongoing conflict between Israel and Iran, noting that disrupted global energy supply chains have pushed up prices that are now passing through to both businesses and consumers across the country. “Different sectors are bearing uneven impacts from these disruptions, but the pressure is widespread,” Miller explained. He added that the bank stands ready to collaborate with the federal government to bolster Australia’s economic resilience, including continued investment in a stable, sustainable national energy system to mitigate long-term supply risks.
In its half-year results, Westpac reported a net profit of $3.5 billion when excluding one-time notable items, marking a 1% year-on-year increase from 2025 but a 1% dip over the past six months. Despite the uncertain macroeconomic landscape, the bank recorded strong growth across key lending lines: Australian business lending rose 16% over the 12-month period, while institutional lending jumped 23%. Customer deposits also grew by 7%, driven by expanding transaction account volumes, and operating expenses fell 2% compared to the previous half-year.
Miller noted that the vast majority of mortgage holders – around 85% – had built buffers ahead of the latest conflict, with payments ahead of schedule. Even so, the bank has recorded a clear slowdown in residential mortgage applications in April, signaling that fewer Australians are moving forward with home purchases amid rising borrowing costs.
Ahead of the upcoming federal budget, Miller also called for targeted national productivity reforms to maintain Australia’s global competitiveness. “We must seize the opportunity for meaningful reform to put the economy on a stronger footing for coming challenges,” he said.
Westpac’s downbeat forecast aligns with projections from two other major Australian banks, ANZ and National Australia Bank (NAB), all three of which point to the Middle East conflict as a core driver of growing uncertainty. NAB Chief Executive Andrew Irvine acknowledged that while the environment has become far more volatile, with volatility expected to persist for some time, most Australian households start from a position of financial resilience.
Like Westpac, Irvine predicts an interest rate hike will come out of Tuesday’s RBA monetary board meeting, followed by one additional increase. He noted that the central bank faces an extraordinarily difficult balancing act, as high inflation remains a persistent threat to household and business stability that must be brought under control. “The RBA has a devilishly difficult job ahead of them,” Irvine said. “Inflation is running too high and we have to get it under control. Inflation is bad for households and businesses.”
For its part, ANZ reported that most of its mortgage customers have kept up with payments so far, but CEO Nuno Matos warned that the full impact of the Middle East crisis has yet to be felt. “The longer global oil supply remains constrained, the greater the risk that this crisis shifts from primarily an inflation challenge to a broader shock that hits supply chains and overall economic growth,” Matos explained.









